Why choose a structured product over standard investments?
This is better explained by using an example, for this instance, let’s use Facebook.
Why invest in a structured product with Facebook as an underlying, over just investing into Facebook shares directly? Why would you choose to receive a max 12.21% return on your Facebook investment when you could potentially make more if you invested directly into the stock and its worth went up? Let me tell you why investing in structured products favours some investors! To see how this fits the wider picture, it helps to start with our guide to capital protected investments, then come back to how structured products protect against market fluctuations in practice.
Although the maximum return you can make off the coupons is 12.21%, this is accompanied by the safety of the investment: Protection Barrier 50% and Coupon Trigger 60%.
Even if Facebook isn’t performing very well, it is kept safe by these low parameters as well as not preventing coupons from getting paid. If you were directly invested in Facebook, when the stock goes down, so does the capital you have invested.
Do you worry that your structured products aren’t able to withstand market fluctuations??? Well worry no longer, as you are able to minimise the risk in your investment and protect yourself as much as you can against market fluctuations. This can be through implementing a low protection barrier on your investment, so that the underlyings are less likely to breach it. This can also be done by including the memory feature so that if you miss a coupon due to a sudden fluctuation in the market then there will be opportunities to recover this coupon at future observations. There are many benefits to investing in NEBA Financial Solution’s structured products. Most importantly is that we tailor our investments to meet your needs so that you are in full control of your investment. You can make your investments as safe or as adventurous as you’d like.
How structured products protect against market fluctuations
The protection on a structured product is built in from the start, and it usually takes one of two forms. A protection barrier only comes into play if the underlying falls below a set level, for example 50%, at which point your capital becomes exposed to the fall. A buffer works differently, absorbing the first slice of any fall, so if a product has a 20% buffer and the market drops 15%, your capital is returned in full, and only losses beyond the buffer reach you. Barriers tend to give deeper protection that switches off suddenly, while buffers give shallower protection that is always working.
A short example makes it clearer. Say you hold a note on an index with a 50% barrier, and over the term the index falls 30%. Because the fall has not breached the barrier, your capital is returned in full at maturity, even though a direct holding in that index would have left you 30% down. If instead the index fell 55%, the barrier is breached and you would take the loss on the underlying. The barrier does not remove risk, it changes the point at which risk starts to bite.
It is worth being clear that this protection is conditional. It depends on the barrier holding at the observation that matters, and it depends on the issuer being able to meet its obligations, because a structured note is ultimately a claim on the bank that issues it. Understanding those two conditions is the difference between a product that suits a client and one that only sounds like it does. If the mechanics here are new, our explainer on what is a structured product sets out the building blocks in more detail.
Features
When tailoring your investment to your personal needs, you have many options to choose from when customising your investment. Some of you may be asking, why structured products over other investments? Let me tell you why!
Structured products offer many features which can be used to benefit your investments:
Growth, there is potential for enhancing yield
Flexibility, Choice of stocks, indices, sectors, currencies and commodities.
Accessible, Daily Tradable
Cost Effective, Clients are invested at 100% & no annual management charges
Protection, of capital in a falling market.
Minimising risks vs maximising returns
We at NEBA, will be with you every step of the way!
We provide product reports on your investments which we will send out frequently to our clients to ensure they are up to date on their investments. We will notify our clients if there are any changes in their investments, along with all the information they will need to make decisions if needed.
Visit www.nebafinancialsolutions.com to see our Structured Products and UCITS Funds
Important information
Capital is at risk. Structured notes are complex instruments and are not suitable for all investors. Returns and the return of capital are conditional and depend on both the performance of the underlying and the financial standing of the issuer. This is for information only and does not constitute investment advice or a personal recommendation. Past performance is not a guide to future results.
